That was the year that was

PBC Business Recovery & Insolvency proudly sponsor the SME Northamptonshire Business Awards 2016

How many of you can associate with the question, ”Where did [the month] go?” In fact, it does not seem that long ago since I was looking back at 2015 to see what PBC had achieved, yet here I am doing it all over again!

Obviously 2016 will be remembered for the (Brexit) vote on 23 June 2016. It is clear we have a period of uncertainty ahead of us and there have even been claims insolvency practitioners will be extremely busy as a result.  However, at PBC we believe the economy is generally robust and while there will always be losers, there will also be plenty of winners so no need to panic or allow the media to talk us into a recession.

Despite what the pundits say, insolvency numbers have fell year-on-year for the past three years and insolvency practitioners are all bemoaning the general lack of new instructions. To be fair, PBC have experienced a similar trend, although the amount of professional advisors who recommend our services has continued to expand resulting in another year of growth.

I suppose two key events in 2016 were the launch of the PBC mediation service, which has attracted significant interest from solicitors and barristers alike. So far, the service has a 100% success record in settling disputes including a £1 million negligence claim against another insolvency practitioner!  The other point of note was the acquisition of another insolvency practice, Bottomley & Co who were based in Rugby.  As part of that acquisition the re-branded PBC Bottomley & Co moved its operations to Coventry, which provides further potential for work in a wider geographical area.

How many readers have experienced those moments when you wonder why you are working all the hours available and for seemingly little reward?  I am no different.  However, earlier this year an extract of an independent industry report was sent to us that concluded PBC was the 25th fastest growing insolvency practice in the UK and were one of only 62 practices regarded as strong in the industry.  I have to confess a slight puffing out of the chest with pride.  That preceded thanking the PBC team because it is their terrific team spirit and desire to ensure tasks are undertaken in a timely and professional manner that contributed to this independent conclusion.

Outside of our day job PBC have focussed on two specific areas.  The first is to be sponsors of the Northamptonshire SME Awards.  We are so proud to have been involved and it has to be acknowledged the entries received were indicative of how vibrant business is throughout the county.  Secondly and for very personal reasons for Kym Carvell, PBC have chosen the Ronald McDonald House charity as our charity to support for the remainder of 2016 and for next year.  Oh, before you ask, no it has nothing to do with burgers and a big clown!  Check them out in this article where you can find out more.  Alternatively, speak to Kym at our Northampton office.

Gary Pettit

 

 

 

Can they touch my pension?

Coin Dropping Into Piggy Bank

The title of this piece is the question I am asked regularly by individuals who are threatened with personal insolvency and are (understandably) concerned their personal pension may be used to repay creditors.

Personal pensions used to be an asset that could be realised for the benefit of creditors. Provided the bankrupt was over the age of 50 years a trustee could realise the tax-free lump sum, the annuities or, in many cases, both.  This all changed with the introduction of the Welfare Reform and Pensions Act 1999 (“WRP”) where personal pensions were primarily no longer bankruptcy assets.

What has been long debated is whether a pension ceases to be a pension and becomes income a person is entitled to when they exercise their right to draw down the pension benefits and, therefore fall outside the protective ring of the WRP.

A bankrupt has a statutory duty to cooperate with their trustee and may face serious consequences for failing to comply, including imprisonment. A trustee also has general powers to seek and overturn previous dealings.  For example, back in the early 1990s many matrimonial homes were transferred into the sole name of the non-business owner for the consideration of “Love and affection” and were, quite rightly, deemed void.  These general duties and powers assist a trustee in his duty to maximise realisations for the creditors and the income derived from pension lump sums and annuities provide funds that assist repayment.

In the case of Raithatha –v- Williamson [2012] EWHC 909 these duties were tested when a trustee demanded the bankrupt exercise his rights to receive the benefits of his personal pension and the judge determined the pension benefits did fall within the definition of income.  Bad news for pension holders who could, by way of this decision, be forced to “Retire early” when it came to their pension benefits.

However, on 7 October 2016 the Court of Appeal overturned the Williamson case. In the matter of Horton –v- Henry the judges decided uncrystallised pension rights did not constitute “Income” and neither the court nor the trustee had power to decide how a bankrupt should exercise elections open to them in relation to their pensions.

This decision does appear to be contrary to the general powers and even promotes debt avoidance by pouring money into personal pensions. However, a trustee can challenge excessive pension contributions and, as I proved a few years ago, demonstrate the pension was merely a tool to defraud creditors.  In that sort of scenario a trustee can obtain some (or all) of the pension benefits.

Assuming the Horton case will not be appealed to the Supreme Court the message appears clear.  If you are over 50 years of age then unless you really need the pension benefits resist exercising your rights to receive them until you are discharged from bankruptcy.  Alternatively, if in doubt you should consult an insolvency practitioner or a pension advisor as a lack of patience (in terms of when to exercise your rights) could prove costly for your future.

Gary Pettit

PBC set new ground-breaking law

On Monday 14 November 2016 at 10.12 a.m. Gavin Bates and Gary Pettit from PBC Business Recovery & Insolvency were appointed joint administrators of Bradford Bulls Northern Limited. They were asked to consent to the appointment just over an hour beforehand.

bradford

Bradford Bulls are former World club champions and Super League champions but over the past four years have crashed into a depth of financial difficulties. Faced with a winding up petition presented by HM Revenue & Customs it was administration or just 18 minutes after the administration appointment the club were due to be wound up.

The administration appointment was made by the holder of a floating charge that secured personal lending. Once appointed the administrators expressed some concern the loan agreement may be flawed in terms of the power to enforce its security and having raised this with their solicitors it was agreed to seek court directions to declare the appointment as valid.

For those not involved with insolvency, if the appointment of an administrator is deemed invalid the adminstrator can be held guilty of trespass. Also, the appointment of administrators is determined not only by the date but the TIME of appointment.

Based upon advice two applications were filed, namely:

  1. Seeking a declaration that the appointment by the floating charge holder is valid, or failing that;
  2. The court make an administration order with retrospective effect.

The applications came before Justice Mann in the High Court on Monday 21 November 2016. On considering the applications the judge noted HM Revenue & Customs supported the appointment of Gavin Bates and Gary Pettit and that administration would serve a better purpose for the stakeholders than the alternative of liquidation.  The judge also had to consider whether the court had the power to make the appointment retrospective.  In not doing so he automatically places the adminsitrators in a position where they were trespassers for the previous week.

After considering the insolvency provisions, the benefits of administration and the support from the largest un-connected (and petitioning) creditor Justice Mann decided the court did have the power to make retropsective orders. Rather than consider the legal arguments over the vailidity of the floating charge security he terminated the original appointment with effect from 14 November (ie the date of the original appointment) and made an administration order including the appointment of Gavin and Gary effectively from 10.13 a.m. on Monday 14 November.